Financial Crime World

Title: Liechtenstein’s Strict Anti-Money Laundering Regulations: Identifying Clients, Polítically Exposed Persons (PEPs), and Documenting Information in Private Banking

Introduction

Amidst global efforts to combat financial crimes and money laundering, the European country of Liechtenstein has established rigorous anti-money laundering (AML) measures aligning with the Financial Action Task Force (FATF) international standards. As one of the 28 European Union (EU) member states through the European Economic Area (EEA), Liechtenstein implements relevant EU directives into its national laws.

Private Banking and AML Regulations

Private banking and wealth management institutions operating in Liechtenstein are subject to stringent due diligence requirements according to the “Due Diligence Act” and its implementing ordinance. These regulations impose various procedures designed to prevent financial crimes.

Identifying Clients and Beneficial Owners

Banks, investment firms, asset managers, and trust service providers are obligated to verify the identity of their clients and the beneficial owners of their assets (1). This process generally involves a series of personal meetings for identity verification:

  • Financial intermediaries inspect and record:
    • Passport, identity card, or driving license
    • Utility bills or other proof of address
    • Additional client information

Politically Exposed Persons (PEPs)

A PEP is defined as any natural person who held a prominent public function within the previous year, along with their immediate family members and close associates (1, 2). This includes heads of state, members of parliament, high-ranking military personnel, and their relatives and close associates.

Financial intermediaries must adhere to increased due diligence measures when engaging in business relationships with PEPs:

  • Obtain approval from at least one member of the management
  • Ongoing annual approval

Documentation Requirements

To open an account, clients must present the following minimum identification documentation:

  • Full name
  • Date & place of birth
  • Address or residence
  • Citizenship
  • Tax identification number

Address proof may include utility bills, while identity documents should be certified copies of either:

  • Passport
  • ID card
  • Driving license

Tax Offenses

Tax offenses are considered predicate offenses for money laundering under Liechtenstein law. Furthermore, financial crimes committed through fraud or breach of trust also fall under this classification (1). This implies enhanced precautions if suspected tax offenses or other financial crimes arise.

Compliance Verification

Liechtenstein’s banking association requires banks to verify clients’ tax compliance via an internal directive (3). Financial intermediaries may request tax compliance confirmations from clients and their tax advisers.

Liability

Neglecting AML and financial crime regulations carries severe consequences for financial intermediaries and their employees:

  • Criminal prosecution: Up to six months in prison or a fine of up to 360 daily fine rates
  • Administrative fines: Up to 200,000 Swiss francs
  • Repeated or systematic offenses: Up to 5 million Swiss francs

Clients can also face criminal and civil liabilities for money laundering and financial crimes (1).

[1]: Due Diligence Act (Liechtenstein). Accessed January 2023. https://www.regista.li/gesetze/durchfuhrungsbestimmungen-durchfuhrungsbestimmungen-zum-due-diligence-gesetz-ddgl-nov-2018-beglaedert [2]: FATF Recommendations (FATF). Accessed January 2023. https://www.fatf-gafi.org/publications/faterecommendations/documents/fatf-recommendations.html [3]: Internal Directive (Liechtenstein). Accessed January 2023. https://www.listg.li/bde/files/media/articles/banken/listg-2020-12-15-kontrollauftrag-zur-verifikation-des-steuerkompliance-standes-von-privatkunden-final.pdf